Bloomberg News

Facebook Claimant Ceglia Charged With Faking Contract

October 26, 2012

Facebook Claimant Paul Ceglia Charged With Faking Contract

Paul Ceglia outside his home in Wellsville, New York. Photographer: Bob Van Voris/Bloomberg

Paul Ceglia, who sued Facebook Inc. (FB:US) and its chief executive officer, Mark Zuckerberg, was arrested and charged with fabricating evidence to support his multibillion-dollar claim that he owns part of the world’s biggest social network.

Ceglia faked e-mails from Zuckerberg, destroyed evidence and forged the 2003 contract on which he bases his claim, U.S. prosecutors said. Ceglia was arrested today by federal agents at his home in Wellsville, New York, according to a statement from the office of U.S. Attorney Preet Bharara in Manhattan.

“Ceglia’s alleged conduct not only constitutes a massive fraud attempt, but also an attempted corruption of our legal system through the manufacture of false evidence,” Bharara said in the statement. “Dressing up a fraud as a lawsuit does not immunize you from prosecution.”

Ceglia sued in 2010, claiming Zuckerberg signed a contract that gave him a share in Facebook while Zuckerberg was a student at Harvard University. Facebook, based in Menlo Park, California, has claimed from the start that Ceglia’s claim is fraudulent.

Ceglia is charged with one count each of mail fraud and wire fraud, each of which carries a maximum sentence of 20 years in prison. He pleaded not guilty today in federal court in Buffalo, according to Barbara Burns, a spokeswoman for William Hochul Jr., the U.S. Attorney for western New York. Ceglia was ordered freed on $21,000 cash bail, she said. His release is delayed until Oct. 29 to permit the government to appeal the bail order.

Postal Inspector

Ceglia’s lawyer, Dean Boland, of Lakewood, Ohio, didn’t return voice-mail messages seeking comment on the criminal charges.

The criminal complaint against Ceglia, filed by U.S. Postal Inspector Douglas Veatch, covers the entire timeframe of the civil suit, from when he filed the claim in June 2010, until this month.

The mail fraud count targets an amended complaint Ceglia filed in April 2011, which attaches e-mails between Ceglia and Zuckerberg. The government claims those e-mails are fraudulent.

On July 22, 2004, a week before Zuckerberg incorporated Facebook, Ceglia claimed, Zuckerberg sent an e-mail wishing him happy birthday and offering to return his $2,000 investment.

‘Other Things’

“Another summer is here and I still don’t have any time to build our site, I understand that I promised I would, but other things have come up and I am out in California working during break,” Zuckerberg wrote, according to Ceglia.

Ceglia’s e-mails also show Zuckerberg discussing Cameron and Tyler Winklevoss, two Harvard students who would later sue Zuckerberg over Facebook’s origins.

Prosecutors claim Ceglia altered a contract Zuckerberg signed in April 2003 relating to his work on StreetFax.com, Ceglia’s failed Internet business that was intended to sell photos of traffic intersections to insurance companies. The genuine contract concerns only the StreetFax work and doesn’t mention Facebook, according to the government.

Zuckerberg has said he didn’t conceive the idea for Facebook until months later.

Veatch said he interviewed Zuckerberg and another unidentified Facebook cofounder as part of his investigation. Veatch also spoke with an unidentified person who worked with Ceglia on the StreetFax site in 2003, he said in the complaint.

Ceglia’s contract case is Ceglia v. Zuckerberg, 10- cv-00569, U.S. District Court, Western District of New York (Buffalo). The criminal case is U.S. v. Ceglia, 12-MAG-2842, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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